Upholding Marital Agreements: 2+ out of 3

In its November 23, 2016 decision in Gardella v. Remizov, the Second Department upheld an improperly-executed 2002 postnuptial agreement on the basis of ratification, and a 2006 postnuptial agreement alleged to be unconscionable, but sent the matter back to the trial court for financial disclosure and an inquiry to consider the parties’ 2010 separation agreement.

The parties to this matrimonial action were married in 2000. In October 2002, the parties entered into a postnuptial agreement which provided, among other things, that the marital residence and the wife’s private medical practice were the wife’s separate property. In 2006, the parties entered into a second postnuptial agreement which provided that four parcels of real property in Florida acquired by the parties during the marriage had been purchased with the wife’s separate property, and further addressed the distribution of those four parcels in the event of a divorce.

In 2010, the parties entered into a separation agreement, which addressed, inter alia, issues of maintenance and equitable distribution of the parties’ respective assets. At the time, the wife, a neurologist, was earning approximately $600,000 per year, and the husband, a wine salesman, was earning approximately $40,000. The separation agreement provided, among other things, that the husband would have no interest in any of the assets acquired during the parties’ marriage, including six parcels of real property, the wife’s partnership interest in a neurological practice, and the wife’s bank and brokerage accounts. The husband also waived his right to spousal maintenance. The husband was not represented by counsel when he executed the separation agreement.

In November 2011, the wife commenced this action for a divorce and asked for a judgment of divorce which incorporated but did not merge the terms of the separation agreement. In his answer, the husband asserted counterclaims seeking to vacate the separation agreement and the 2006 postnuptial agreement as unconscionable and the product of fraud, duress, and the wife’s overreaching.

The wife moved for summary judgment dismissing the husband’s counterclaims and for the entry of a judgment of divorce. The husband cross-moved for summary judgment on his counterclaims, to nullify the 2002 postnuptial agreement for lack of acknowledgment, and for financial disclosure. By order dated January 31, 2013, Nassau County Supreme Court Justice Edward A. Maron granted the wife’s motion for summary judgment dismissing the husband’s counterclaims and denied the husband’s cross motion. The husband appealed from the judgment of divorce granted the wife.

The Second Department noted that marital settlement agreements are judicially favored and are not to be easily set aside.

Although judicial review of such agreements is to be exercised sparingly, with the goal of encouraging parties to settle their differences by themselves . . . courts have thrown their cloak of protection’ over postnuptial agreements, and made it their business, when confronted, to see to it that they are arrived at fairly and equitably, in a manner so as to be free from the taint of fraud and duress, and to set aside or refuse to enforce those born of and subsisting in inequity.

The appellate court noted that an agreement is unconscionable if it is one which no person in his or her senses and not under delusion would make on the one hand, and no honest and fair person would accept on the other, the inequality being so strong and manifest as to shock the conscience and confound the judgment of any person of common sense.

Here, the wife had demonstrated her prima facie entitlement to judgment as a matter of law dismissing the husband’s counterclaims which sought to vacate the separation agreement. The separation agreement recited that each party entered into the agreement of his or her own “volition and free will,” without the use of “coercion, force, pressure or undue influence,” and that each of them either had been afforded an opportunity to obtain counsel or had waived the right to do so. The separation agreement contained a clause stating that both parties had a “full awareness” of the assets and financial condition of the other, or had waived discovery of the same. The wife also submitted a separate affidavit executed by the husband contemporaneously with the separation agreement in which he stated that he had read the separation agreement “word for word,” that he understood its contents, that it was executed voluntarily and of his own free will, and that he chose not to seek the advice of counsel.

Modifying Justice Maron’s order, the Second Department held that the husband’s submissions were sufficient to raise triable issues of fact as to the validity of the separation agreement. Under the terms of the separation agreement, the husband relinquished all of the property rights that he acquired during the marriage, including any interest that he may have had in the wife’s partnership interest in a neurological practice and the parties’ four properties in Florida, as well as any spousal maintenance. Given the vast disparity in the parties’ earnings, the evidence that the husband had no assets of value, and the husband’s documented medical condition which inhibits his future earning capacity, the husband’s submissions were sufficient to create an inference that the separation agreement was unconscionable. In addition, the husband’s evidence indicating that the wife sold almost $1 million in securities in the months preceding his execution of the separation agreement, the value of which were not accounted for in the list of her bank and brokerage accounts therein, raises a triable issue of fact as to whether the wife concealed assets. Under these circumstances, further financial disclosure should have been directed, to be followed by a hearing to test the validity of the separation agreement.

However, contrary to the husband’s contention, Justice Maron properly awarded the wife summary judgment dismissing the husband’s counterclaim which sought to vacate the 2006 postnuptial agreement.

In addition, while the husband correctly contended that the 2002 postnuptial agreement was not properly acknowledged in the manner required by Domestic Relations Law § 236(B)(3), the evidence established that the husband ratified that agreement by accepting the benefits of it and by waiting more than eight years to seek its nullification. No inquiry into the validity of the 2002 postnuptial agreement or the 2006 postnuptial agreement was warranted.

About the Practice

Mr. Cahn’s practice is concentrated in the areas of family and commercial “divorce” and estate litigation, arbitration, lawyer-assisted mediation and Collaborative Law.

As to family law matters, the practice includes divorces, themselves, as well as custody and visitation, child and spousal support, and post-divorce matters, and domestic violence and family offense proceedings, in both the Supreme and Family Courts.